Power and Position in Negotiation

Posted 16/11/2017

A frequent area of discussion in
negotiation
is the idea of the balance of power between the parties involved. This often feels
like a clear-cut position, but there are a number of reasons to explore this more
completely, as the actual balance of power between two parties may be other than
what is assumed, or historically apparent.

Fortunately, we have a host of familiar analytical tools we can use to develop a
better understanding of the power balance. The first to look at is the Supplier Positioning
analysis, which asks us to consider how the supplier thinks about us. If we are in
an apparent low power and low attractiveness position, we will often see a characteristic
lack of interest, slow response to service issues and limited engagement; Even worse,
we may see a supplier attempting to exploit their position with us. We need to look
at this and consider what is driving our attractiveness to a supplier. The tool also
challenges us to look for differentiated behaviour between different parts of a particular
supplier, perhaps from different countries, regions or divisions. There is a challenge
here, in that we can feel that we are in a high-power position, but the supplier
still seems to treat us inappropriately. We need to explore why this might be to
get a better understanding of what is going on.

We can also look at the areas of Interest that the supplier has; if we can identify
what it is that the supplier is aiming for, or driven towards, we can influence the
balance of power by positioning ourselves towards that interest. We have explored
supplier interests further in another blog (link at bottom of this article). Clearly,
being able to align better to those interests puts us in a more powerful position.

A deeper tool is a variation on our old favourite, Porters 5 Forces. However, as
we are considering this from a purchasing perspective, we have to modify if from
the original concept, and recognise that Porters areas of Threat (Substitutes and
New Entrants) are actually opportunities, and also, we are positioned not in the
centre of the market competition, but to the right-hand side as a buyer. Once we
have allowed for those variations (in a new model which I now call ‘Marks 5 Forces)
we can start to look at what is driving the balance of power for a particular supplier,
while considering their participation in the marketplace as a whole.

Each of these tools provides an aspect of the power balance which is in place between
ourselves and the supplier. What we are aiming to do is to find insights which help
us swing the balance of power in our direction (if we are feeling disadvantaged)
or make sure we are taking advantage of the power we already have. Quite often, once
looking more deeply at the power balance, we will find that the position is not as
we perceive it. History of relationships, or a particular view of the marketplace,
can often swing power in a particular direction.

We often see positions portrayed where the power swings not because of marketplaces,
but more because of the senior relationships in businesses, and we need to recognise
that not all power comes from market positions - people are involved as well. This
emphasises the need to make sure our stakeholder management is working well when
embarking on negotiations where the supplier is well connected internally.

So, we need to stand back and think about power in negotiations, but to do it with
an analytical viewpoint, using familiar tools to inform insights, and therefore actions,
which will help us to optimise our position. If we can do that well, we can get better
outcomes from our negotiations.